CPA AUD Exam | Auditing and Attestation | Practice Questions & Verified Answers | 2026-2027
c. A crated cutting machine in the shipping department, not fraud, not a bill and hold, they will insect it and tell you if
addressed to a nearby U.S. naval base, with a Department
of Defense "Material Inspection and Receiving Report"
attached, dated November 30, 20X0, and signed by the
Navy Source Inspector.
internal control the policies and procedures implemented by an entity to prevent or detect material
accounting errors or frauds and provide for their correction on a timely basis
RMM combination of inherent risk and control risk
inherent risk the prob that a mm either error or fraud will occure before befoe considering the
client's ic - nature and evironment
control risk failure to prevent
tests of controls verify that effective controls are in place
substantive testing verify account balances by examining invoices or by doing analyticals
detection risj auditor's sub procedures fail to detect mm
audit risk the probability that an audit team will express an inappropriate audit opinion when
the financial statements are materially misstated
if set AR low and both IR and CR are high a lot of sub testing for acceptable (low) level
inverse relationship between reliance on ics and sub testing
overview (steps of audit) 1. plan audit
2. gain understanding (flowchart)
3. walkthrough
4. ic questionaiire (memory jogger)
5. functional testing of ic
6. sub testing
7. complete audit (rep letter)
8. audit report
ALways confirm AR except when immaterial
ineffective
great controls
pos confimration reply
, CPA AUD Exam | Auditing and Attestation | Practice Questions & Verified Answers | 2026-2027
neg no relphy
Alternative procedures to AR subsequent tax receipts next month after confirmation date to verify and assess
allowance for doubtful accounts
rev and collection cycle 1. Customer order
2. physical custody
3. ar recording
4. cash receipts recording
which of the following controls would most likely reduce thr 1. a bank lockbox system
esik of diversion of customer receipts by a client's
employees
to provide assurance that each voucher is submitted and 2 stamped paid by the the check signer
paid only once, the auditors most likley would examine a
sample of paid vouchers and determine whether each
voucher is
In testing controls over cash disbursements, the auditors 4 is responsible for mailing the checks
most likely would determine that a person who signs
checks also
to gather evidence regarding the balance per bank in a 4 general ledger
bank reconciliation, the auditors would examine any of the
following except
You have been assigned to the year-end audit of a fin 3 coordinate the count of cash with the count of marketable securities and other
institution and are planning the timing of audit procedures negotiable assets
related to cash. you decide that it would be preferable to
Which of the following procedures would the auditors most Observe the consistency of the employees' use of cash registers and tapes.
likely perform to test controls relating to management's
assertion about the completeness of cash receipts for cash
sales at a retail outlet?
g. Reconciliation of the bank account should not be Processes cash disbursements.
performed by an individual who also:
The auditors suspect that a client's cashier is (1) Details of bank deposit slips with details of credits to customer accounts.
misappropriating cash receipts for personal use by lapping
customer checks received in the mail. In attempting to
uncover this embezzlement scheme, the auditors most
likely would compare the:
In order to guard against the misappropriation of company- Require that the safekeeping function for securities be assigned to a bank or
owned marketable securities, which of the following is the stockbroker that will act as a custodial agent.
best course of action that can be taken by a company with
a large portfolio of marketable securities?
Hall Company had large amounts of funds to invest on a An investment committee of the board of directors.
temporary basis. The board of directors decided to
purchase securities and derivatives and assigned the
future purchase and sale decisions to a responsible
financial executive. The best person or persons to make
periodic reviews of the investment activity would be:
c. A crated cutting machine in the shipping department, not fraud, not a bill and hold, they will insect it and tell you if
addressed to a nearby U.S. naval base, with a Department
of Defense "Material Inspection and Receiving Report"
attached, dated November 30, 20X0, and signed by the
Navy Source Inspector.
internal control the policies and procedures implemented by an entity to prevent or detect material
accounting errors or frauds and provide for their correction on a timely basis
RMM combination of inherent risk and control risk
inherent risk the prob that a mm either error or fraud will occure before befoe considering the
client's ic - nature and evironment
control risk failure to prevent
tests of controls verify that effective controls are in place
substantive testing verify account balances by examining invoices or by doing analyticals
detection risj auditor's sub procedures fail to detect mm
audit risk the probability that an audit team will express an inappropriate audit opinion when
the financial statements are materially misstated
if set AR low and both IR and CR are high a lot of sub testing for acceptable (low) level
inverse relationship between reliance on ics and sub testing
overview (steps of audit) 1. plan audit
2. gain understanding (flowchart)
3. walkthrough
4. ic questionaiire (memory jogger)
5. functional testing of ic
6. sub testing
7. complete audit (rep letter)
8. audit report
ALways confirm AR except when immaterial
ineffective
great controls
pos confimration reply
, CPA AUD Exam | Auditing and Attestation | Practice Questions & Verified Answers | 2026-2027
neg no relphy
Alternative procedures to AR subsequent tax receipts next month after confirmation date to verify and assess
allowance for doubtful accounts
rev and collection cycle 1. Customer order
2. physical custody
3. ar recording
4. cash receipts recording
which of the following controls would most likely reduce thr 1. a bank lockbox system
esik of diversion of customer receipts by a client's
employees
to provide assurance that each voucher is submitted and 2 stamped paid by the the check signer
paid only once, the auditors most likley would examine a
sample of paid vouchers and determine whether each
voucher is
In testing controls over cash disbursements, the auditors 4 is responsible for mailing the checks
most likely would determine that a person who signs
checks also
to gather evidence regarding the balance per bank in a 4 general ledger
bank reconciliation, the auditors would examine any of the
following except
You have been assigned to the year-end audit of a fin 3 coordinate the count of cash with the count of marketable securities and other
institution and are planning the timing of audit procedures negotiable assets
related to cash. you decide that it would be preferable to
Which of the following procedures would the auditors most Observe the consistency of the employees' use of cash registers and tapes.
likely perform to test controls relating to management's
assertion about the completeness of cash receipts for cash
sales at a retail outlet?
g. Reconciliation of the bank account should not be Processes cash disbursements.
performed by an individual who also:
The auditors suspect that a client's cashier is (1) Details of bank deposit slips with details of credits to customer accounts.
misappropriating cash receipts for personal use by lapping
customer checks received in the mail. In attempting to
uncover this embezzlement scheme, the auditors most
likely would compare the:
In order to guard against the misappropriation of company- Require that the safekeeping function for securities be assigned to a bank or
owned marketable securities, which of the following is the stockbroker that will act as a custodial agent.
best course of action that can be taken by a company with
a large portfolio of marketable securities?
Hall Company had large amounts of funds to invest on a An investment committee of the board of directors.
temporary basis. The board of directors decided to
purchase securities and derivatives and assigned the
future purchase and sale decisions to a responsible
financial executive. The best person or persons to make
periodic reviews of the investment activity would be:
